^ 


'..A 


FUNCTIONS  AND  NEEDS  OF  OUR  GREAT  MARKETS 


BY 

WILLET  M.   HAYS 

u 

Assistant  Secretary,  Department  of  Agriculture, 
Washington,  D.  C. 


Publication  No.  711 

American  Academy  of  Political  and  Social  Science 

Reprinted  from  The  Annals,  January,  1913 


Price,  25  cents 


This  reprint  is  made  from  the  January,  1913,  ANNALS 
containing  the  following  papers: 

BRITISH  COLUMBIA  AND  BRITISH  INTERNATIONAL  RELATIONS 
E.  R.  GosNELL,  Victoria,  B.  C. 

RECIPROCITY 

Clifford  Sifton,  Ottawa,  Canada. 

CANADA  AND  THE  PREFERENCE:  CANADIAN  TRADE  WITH  GREAT 
BRITAIN   AND  THE   UNITED   STATES 

S.  MORLEY  WiCKETT,  Ph.D.,  of  Wickett  &  Craig,  Ltd.,  Toronto,  Canada. 

THE  LEGAL   STATUS   OF   HUDSON'S   BAY 

Thomas  Willing  Balch,  of  the  Philadelphia  Bar. 

THE  UNITED  STATES  AND  CANADA  IN  THEIR  HUNDRED  YEARS 
OF  PEACE 
James  L.  Tryon,  New  England  Director  of  the  American  Peace  Society, 
Boston. 

THEOCRATIC  QUEBEC 

E.  M.  Sait,  Ph.D.,  Department  of  Politics,  Columbia  University. 

CANADIANS   IN   THE  UNITED   STATES 

S.  MoRLEY  Wickett,  Ph.D.,  Toronto,  Canada. 

CANADA  AND  THE  CHINESE:  A  COMPARISON  WITH  THE  UNITED 
STATES 
Paxjl  H.  Clements,  A.M.,  Harrison  Fellow  in  Political  Science,   Uni- 
versity of  Pennsylvania. 

THE  MINERAL  RESOURCES  OF  CANADA 

G.  A.  Young,  of  Department  of  Mines,  Geological  Survey,  Ottawa. 

MINING  LEGISLATION   IN   CANADA 

J.  M.  Clark,  LL.B.,  K.C,  Toronto,  Canada. 

CANADIAN   BANKING 

H.  M.  P.  Eckardt,   Author   of    "A   Rational   Banking   System"   and 
"Manual  of  Canadian  Banking." 

CANADA  AND   HER  ART 

Eric  Brown,  Director  of  National  Art  Gallery,  Ottawa. 

SOME  CANADIAN   TRAITS 

W.  A.  Ch APPLE,  M.P.,  London,  England. 

CANADIAN   LITERATURE 

J.  Castell  Hopkins,  F.S.S.,  Author  of  "The  Canadian  Aimual  Review 
of  Public  Affairs,"  Toronto,  Canada. 

CANADIAN   STATISTICS 


Price,  $1.50  bound  in  cloth;    $1.00  bound  in  paper.     Postage  free. 


o^ 


FUNCTIONS  AND  NEEDS  OF  OUR  GREAT  MARKETS 


By  Willet  M.  Hays, 
Assistant  Secretary,  Department  of  Agriculture,  Washington,  D.  C. 


The  trading  pit  organizations  of  boards  of  trade  and  chambers 
of  commerce  have  come  to  function  as  crop-reporting  boards  as 
well  as  marts  of  trade.  Unlike  state  and  national  crop-reporting 
boards,  they  are  not  local  to  their  own  country,  but  are  also  inter- 
national in  scope,  taking  account  of  acreages,  crop  conditions  and 
harvested  products  of  the  entire  world.  And,  imlike  publicly-sup- 
ported crop-reporting  boards,  they  take  into  accotmt  demand  as 
well  as  supply.  They  have  more  final  functions  than  have  public 
crop-reporting  boards,  because  they  crystallize  the  whole  knowledge 
of  conditions  of  supply  and  demand  into  actual  daily  prices. 

These  boards  in  the  great  commercial  centers  are,  however, 
very  inefficient  reporters  of  crop  conditions,  in  that  they  do  not  act 
as  unbiased  boards.  The  price  figure  which  they  decide  upon  is 
based  only  in  part  upon  conditions  relating  to  the  supply  and  demand 
of  the  actual  product  and  in  part  upon  thoughts  which  grow  out 
of  the  self-interest  of  the  dealers  in  the  ownership  of  margins  on 
options  and  futures.  The  ownership  of  these  margins,  especially 
in  case  of  exaggerated  comers,  gives  such  a  bias  to  a  portion  of  the 
members  of  these  commercial  price-making  boards  that  their  com- 
posite judgment  is  much  warped. 

These  margins,  risked  on  options  and  futures,  sometimes 
aggregate  many  times  more  than  the  sum  of  the  margins  risked  in 
the  fluctuations  on  the  price  of  the  actual  products  bought  and  sold 
in  the  same  market.  In  determining  prices,  the  money  at  stake  on 
"wind  sales"  takes  a  most  prominent  place  by  the  side  of  actual 
changed  conditions  of  acreage  or  of  the  development  of  the  crop. 
In  other  words,  mischievous  factors  arise  to  prevent  the  free  action 
of  the  law  of  supply  and  demand,  and  the  trading  pit  becomes  an 
agency  interfering  with  what  would  be  the  natural  course  of  events 
in  the  commercial  world.  Associated  with  this  fundamentally  false 
element  in  these  market     organizations,   numerous  abuses  arise. 

(245) 


40G32J 


^46, ^''  ''^  t  v.:;'!^. Annals  of  the  American  Academy 

Sometimes  the  trading  pit,  like  a  mob,  is  affected  with  collective 
hysteria,  which  then  acts  regardless  of  public  interest,  is  demoral- 
izing and  even  disgraceM  in  the  eyes  of  the  world. 

Market  trading  in  futures  and  in  options  is  discussed  by  two 
schools  of  philosophy;  one  asserts  that  dealing  in  futures  and  options 
gives  fluidity  and  acceleration  to  commerce  and  provides  for  hedging; 
that  it  enables  producers,  and  especially  manufacturers,  to  use  all 
their  capital  in  their  immediate  business;  that  it  equalizes  prices 
throughout  the  year  to  the  manufacturers'  advantage,  by  leaving 
the  work  of  looking  after  fluctuations  of  price  to  financiers  trained 
in  speculative  risks,  thus  placing  the  business  of  manufacture  on  a 
more  conservative  basis.  They  even  claim  that  the  machinery  of 
the  pit  adds  values  to  the  actual  product  and  thus  creates  new  values ; 
also  that  there  are  dangers  in  restricting  this  class  of  business  by 
legislation,  which  claim,  they  assert,  is  proven  by  Germany's  expe- 
rience. 

The  other  school  asserts  that  too  much  fluidity  and  acceleration 
to  business  leads  to  frenzied  finance,  monetary  panics,  and  business 
depression;  that  it  destroys  business  confidence;  and  that  it  tends 
to  center  wealth  in  the  hands  of  the  few.  This  school  calls  attention 
to  the  fact  that  markets  for  sugar  and  some  other  products  get  on 
without  deaHngs  in  options  and  futures,  and  that  the  efficiency  of 
restrictive  legislation  has  been  demonstrated  in  southern  states. 
They  urge  that  bucket-shop  dealing  and  the  other  forms  of  dealing 
in  options  and  futiu^es  on  a  small  scale  are  made  possible  by  the 
large  exchanges,  where  different  classes  of  trade  center.  They  assert 
also  that  those  manufacturers,  as  a  class,  who  do  not  hedge  are  more 
successful  than  those  who  do.  And  they  give  emphasis  to  the  fact 
that  these  market  organizations  serve  much  the  same  purpose  as 
did  the  Louisiana  lottery,  tempting  weak  men  to  their  own  ruin. 

It  may  be  safely  asserted  that  this  subject  in  its  relation  both 
to  modem  business  and  to  the  public  welfare  has  not  been  compre- 
hensively grasped  by  any  one  man  or  group  of  men.  The  intri- 
cacies of  dealing  in  futures  and  in  options  are  comprehended  only 
by  the  few  who  are  directly  interested,  and  it  is  clear  that  they  have 
not  given  due  regard  to  the  relations  of  these  dealings  to  the  general 
public  nor  to  the  many  who,  by  speculation,  lose  their  own  financial 
status  and  while  trying  to  get  rich  quick  really  plunge  their  families 
into  the  no-capital  class. 


Functions  and  Needs  of  Our  Great  Markets         247 

It  is  clear  that  so  many  vital  interests  have  come  to  depend 
upon  markets  for  future  delivery  of  commodities  that  a  change 
to  something  better  must  be  constructive  rather  than  destructive. 
Therefore,  to  secure  the  greatest  good  for  all  concerned,  reformative 
measures,  it  would  seem,  should  preserve  the  best  features  in  present 
methods  of  dealing  while  abolishing  their  excesses  and  glaring  wrongs. 
Men  trained  to  philosophic  and  dispassionate  methods  of  scientific 
research  and  generalization,  assisted  by  men  of  experience  in  our 
market  practices,  are  needed  to  look  broadly  at  the  problem  in  all 
its  essential  details  and  to  suggest  constructive  practices  and  devise 
restrictive  and  constructive  laws  which  shall  remedy  existing  evils. 
Plans  for  national  and  international  commissions  are  none  too  broad 
for  problems  as  comprehensive  and  as  important  as  this. 

Although  dealing  in  futures  does  help  oil  the  wheels  of  exchange 
and  adds  elements  of  conservatism,  our  speculative  markets  are 
great  irritants  and  the  ever-present  menace  of  manipulation  produces 
world  market  conditions  at  once  nervous  and  imstable.  The  general 
feeling  that  there  is  a  large  element  of  the  unreal,  the  selfish,  the 
false,  the  wrong,  the  actually  vicious  in  our  general  commercial 
markets  prevents  confidence  and,  broadly  speaking,  is  very  repressive 
to  commerce.  Correctives  are  needed  to  preserve  the  good  and 
eliminate  the  bad  from  the  whole  situation. 

It  must  be  admitted  that  in  making  prices  daily  the  great  market 
performs  a  most  comprehensive,  highly  important  and  necessary 
feat  which  no  other  known  agency  can  perform.  Crop-reporting 
agencies  greatly  assist,  but  only  the  trading  mart  can  serve  as  the 
crucible  in  which  prices  current  are  evolved  out  of  the  conditions  of 
supply  and  demand.  In  relation  to  the  entire  world  product  of  any 
commodity,  as  of  wheat  or  cotton,  the  markets  assemble  as  much 
as  they  can  of  the  facts  available  concerning  the  supply  afforded 
by  the  previous  crop,  also  concerning  the  raw  and  finished  products 
in  store  and  in  transit ;  concerning  the  acreage  and  condition  of  grow- 
ing crops  and  also  concerning  the  present  and  prospective  demand. 

Thus,  in  case  of  wheat  on  May  first,  account  is  taken  of  the 
grain  in  the  hands  of  the  farmers,  in  cotmtry  elevators  and  in  ter- 
minal warehouses  and  mills.  The  acreage  and  condition  of  winter 
wheat  and  the  acreage  of  spring  wheat  in  the  wheat-producing  coun- 
tries of  the  northern  hemisphere  are  taken  into  account,  as  is  also 
the  amount  of  flour  in  store.     The  facts  as  to  stores  of  wheat  and 


248  The  Annals  of  the  American  Academy 

flour  in  stock,  acreages  of  winter  wheat  planted  in  Argentina,  Aus- 
tralasia and  other  southern  hemisphere  countries  are  sought.  The 
prospective  purchasing  power  of  those  who  buy  wheat,  flour  and 
bread  is  roughly  determined  from  the  industrial  activities  of  the 
great  wheat-buying  nations. 

And  in  determining  the  prospective  demand  for  wheat,  facts 
concemingthe  prospective  demand  for  other  commodities  are  secured. 
Even  the  relative  supplies  and  prices  of  meats  are  taken  into  con- 
sideration in  securing  data  to  help  determine  the  prospective  supplies 
of  wheat,  because,  with  high  prices  for  meats,  the  crops  used  to  feed 
live  stock  compete  with  wheat  for  increased  acreages  and  thus  lower 
the  wheat  acreage  and  raise  the  price  of  wheat.  To  coordinate  and 
average  all  these  factors  into  one  single  price  figure  is  an  important 
and  comprehensive  task.  Under  present  conditions  this  work  is 
not  accomplished  in  a  manner  to  give  occasion  for  pride.  Our 
prices  fluctuate  unduly  and  there  is  more  restlessness  than  is  well 
for  the  producer,  the  manufacturer,  the  dealer  or  the  consimier. 
Those  fluctuations  which  arise  from  changes  in  natural  conditions 
should  be  and  can  be  smoothed  down  instead  of  being  exaggerated. 

The  parties  in  the  aggregate  most  fundamentally  interested 
in  our  markets  and  market  prices  are  the  primary  producers  and 
the  consimiers.  Manufacturers,  transporters  and  dealers,  including 
speculators,  are  likewise  deeply  concerned ;  also  all  other  lines  of  busi- 
ness, including  that  of  banking.  Every  one  of  these  classes,  except- 
ing the  speculators,  is  interested  in  stability,  in  the  absence  of  wide 
fluctuation  in  prices. 

The  manufacturer  and  the  dealer,  in  order  to  avoid  the  conse- 
quences of  risking  wide  fluctuations,  often  use  the  market  for  futures 
to  hedge,  i.  e.,  to  sell  against  their  own  purchases.  In  other  words, 
they  use  the  machinery  of  speculation  to  make  their  own  business 
less  speculative.  The  manufacturer  sells  for  future  delivery  to 
responsible  parties  the  same  amount  of  raw  product  as  he  purchases 
for  his  factory  or  mill,  thus  pitting  a  speculative  sale  against  the 
speculative  risk  in  his  purchase.  In  form  this  is  speculation,  but 
practically  it  is  not  gambling,  so  far  as  he  is  concerned.  He  often 
then  at  once  sells  his  finished  product  for  future  actual  delivery 
at  a  price  which  will  cover  cost  of  raw  product,  cost  of  manufacture 
and  profit.  He  thus,  by  a  double  speculative  deal,  insures  the  cost 
of  his  raw  material  at  a  certain  figure,  and  thus  insures  his  net  profits. 


Functions  and  Needs  of  Our  Great  Markets         249 

The  other  items  of  fixed  cost  of  producing  manufactured  products 
being  known,  he  can  thus  affix  his  prices  to  be  charged  and  proceed 
with  nearly  perfect  assurance  of  modest  profits.  With  less  of  risk, 
as  he  thus  stands  between  the  producer  of  the  raw  product  and  the 
consumer  of  the  finished  product,  his  charge  for  manufacture  is 
reduced,  presumably  (if  it  stood  by  itself)  to  the  advantage  both 
of  the  producer  and  the  consumer. 

Each  class  above  named,  excepting  the  successful  speculator, 
is  a  contributor  to  the  expenses  of  speculating  establishments.  The 
main  loss,  probably,  falls  not  on  the  producer  or  the  consumer, 
but  on  the  very  many  small  speculators  who  on  the  average  lose, 
and  on  the  occasional  large  speculator  who  loses.  And  these  losers 
not  only  pay  for  a  large  part  of  the  cost  of  office  maintenance,  tele- 
graph and  other  expenses  attached  to  the  speculative  business,  but 
they  contribute  large  sums  to  the  coffers  of  the  successful  speculators. 
Wealth  is  constantly  going  from  these  losing  classes,  which  need 
their  money  for  the  building  up  of  small  family  estates  to  endow 
the  mother  of  the  nation's  children.  Part  of  this  lost  money  goes 
to  build  up  the  swollen  estates  of  those  few  who  especially  succeed 
at  speculation  or,  as  it  may  properly  be  called,  speculative  gam- 
bling. There  is  enough  of  the  odor  of  wrongdoing  to  produce  a 
bad  moral  effect,  not  alone  on  the  participants,  but  on  the  commu- 
nity at  large. 

There  are  no  adequate  statistics  as  to  the  ultimate  sources  from 
which  is  drawn  the  money  won  by  those  speculators  who  are  success- 
ful. The  commission  fees  paid  to  commission  merchants  who  nego- 
tiate margin  sales  and  purchase  for  individuals,  mainly  outside  the 
membership  of  the  exchanges,  are  paid  by  the  multitude  of  speciila- 
tors  who  thus  risk  their  money  on  margins.  The  same  outside 
speculators  also,  on  the  average,  lose  in  their  wagers  with  the  trained 
dealers  who  are  on  the  ground  and  who  often  combine  to  carry 
through  deals  in  which  a  "comjntmity  of  interests"  helps  them  to 
assure  to  themselves  winnings.  As  suggested  above,  these  outside 
dealers  may  even  lose  so  much  that  they  help  pay  producers  enlarged 
prices  in  time  of  comers  that  "bull"  prices  upwards.  The  fact 
that  comers  are  not  always  premeditated,  but  naturally  grow  out 
of  the  system  of  option  sales,  does  not  make  their  evil  effects  less. 

No  one  has  the  data  to  determine  whether,  on  the  average, 
trading  in  options  and  futures  decreases  the  price  received  by  pro- 


250  The  Annals  of  the  American  Academy 

ducers  and  increases  the  price  paid  by  consumers  or  the  converse. 
It  is  perfectly  clear,  however,  that  in  the  large  the  outside  specu- 
lators and  the  producers  and  consiimers  among  them  lose  money  to 
a  class  of  men  who  do  not  really  pretend  either  to  produce,  to  trans- 
port or  to  manufacture;  and  they  also  pay  the  expenses  of  running 
an  expensive  speculative  machine. 

A  very  rough  estimate  places  the  money  received  from  the 
people  by  exchanges  and  their  bucket-shop  appendages  in  America 
alone  at  upwards  of  $200,000,000  annually.  On  the  face  of  it  this 
seems  a  high  price  to  pay  for  fluidity  and  acceleration  to  the  market 
and  for  the  opportunity  of  hedging.  It  would  seem  that  these 
advantages  cost  the  American  people  more  money  than  they  are 
worth,  besides  being  obtained  at  the  price  of  a  business  plan  which 
seems  to  degrade  our  morals,  as  evidenced  by  reckless  speculation 
and  by  the  practices  of  many  bucket  shops.  Or,  to  put  it  another 
way,  it  would  seem  that  some  plan  could  be  devised  which  would 
give  equal  or  better  service  at  a  fraction  of  the  cost. 

The  report  of  Governor  Hughes'  Committee  on  Specidation 
in  Securities  and  Commodities,  made  public  in  June,  1909,  is  a  very 
useful  contribution  to  this  subject  in  that  it  gives  numerous  facts 
not  hitherto  available.  The  local  character  of  this  commission 
made  it  natural  that  the  discussion  woidd  be  somewhat  provincial, 
not  looking  at  the  subject  from  a  national  standpoint,  let  alone 
from  an  international  standpoint;  nor  from  the  point  of  view  of 
the  unity  of  interests  of  the  brotherhood  of  all  men.  It  vigorously 
points  out  abuses  and  evils,  it  ra,ther  weakly  advises  exchanges  to 
"be  good"  and  to  advise  their  members  who  speculate  to  do  so  tem- 
perately. Its  addition  to  the  detailed  facts  as  to  the  volume  of 
speculative  trading  in  commodities  and  as  to  the  associated  advan- 
tages and  evils  of  dealing  in  options  and  futures  makes  of  it  a  distinct 
mark  for  progression  in  the  discussion  of  the  subject.  And  no  doubt 
it  will  contribute  to  the  solution  of  this  vexed  question. 

Before  the  Committee  on  Agriculture  of  the  United  States  House 
of  Representatives  at  the  hearing  on  option  dealing  in  cotton  in  1910 
it  was  estimated  by  a  number  of  cotton  dealers  that  on  the  New 
York  Cotton  Exchange  105,000,000  bales  are  sold  annually.  Since 
a  bale,  500  pounds,  averaging  twelve  cents  per  pound,  is  worth  $60, 
this  gives  an  aggregate  of  $6,300,000,000  represented  in  option 
sales  of  cotton.     Sales  of  futiures  in  wheat  on  the  Produce  Exchange 


Functions  and  Needs  of  Our  Great  Markets         251 

were  shown  of  over  600,000,000  bushels,  or  stated  in  its  equivalent 
at  one  dollar  per  bushel,  $600,000,000.  The  record  of  the  Coffee 
Exchange  shows  a  sale  of  16,000,000  bags  of  250  pounds  each.  This 
represents,  at  seven  cents  per  pound,  nearly  $300,000,000.  Thus 
in  these  three  commodities,  the  sales  amount  to  over  $7,000,000,000. 

Figures  secured  by  the  present  writer  several  years  ago  indicated 
that  about  one-third  of  the  cotton  sales  were  then  between  member 
and  member  of  the  exchange;  one-third  between  members  of  the 
exchange  and  outsiders,  and  one-third  between  one  outsider  and 
another  outsider,  the  members  in  this  last  case  acting  as  commission 
men  only.  The  members  charge  outsiders  7^  cents  per  bale  com- 
mission, or,  where  the  sellers  and  the  buyers  are  both  outsiders,  the 
member  receives  a  commission  of  fifteen  cents  per  bale.  Where 
the  member  buys  of  or  sells  to  an  outsider  he  literally  charges  the 
outsider  7|  cents  per  bale  for  the  opportunity  to  bet  with  himself, 
the  trained  dealer,  on  the  future  price  of  cotton,  the  dealer  graciously 
using  a  portion  of  this  fee  to  pay  the  expenses  of  the  exchange.  Now, 
for  purposes  of  illustration,  assuming  that  of  the  105,000,000  bales 
35,000,000  are  transactions  between  outsiders,  the  members  at  fifteen 
cents  will  receive  in  commissions  $5,250,000.  For  the  35,000,000 
of  sales  between  members  and  outsiders,  the  members  receive,  at 
7|  cents  per  bale,  $2,625,000,  making  in  all  commission  fees  amount- 
ing to  $7,875,000.  Since  the  membership  is  limited  to  say  500, 
this  provides,  on  the  average,  $15,750  per  member,  surely  quite 
sufficient  to  pay  expenses  with  $5,000  to  $10,000  profit  each. 

It  is  probable  that  in  the  sales  of  35,000,000  bales  between 
members  of  the  Cotton  Exchange  there  is  some  eating  of  little  fish 
by  the  big  fish  and  allowing  other  little  fish  to  enter  the  pond  to 
take  the  place  of  those  which  were  swallowed  and  to  serve  annually 
as  food  for  the  big  fish  who  it  is  believed  know  how  to  consimie  the 
lesser  fish.  But  the  public  has  no  feverish  concern  with  the  differ- 
ences which  exist  among  these  costly  appendages  of  trade. 

As  long  as  the  irritation  remains  within  the  walls  of  the  exchange, 
no  systematic  danger  threatens  the  body  politic;  but  in  their  buy- 
ing and  selling  with  outsiders  arises  inflammation  which  spreads 
outward  and  affects  our  most  vital  business  institutions,  and  the 
homes  which  depend  upon  business  for  accumulative  expenses  and 
for  the  insurance  against  the  rainy  day.  The  35,000,000  bales 
which  members  sell  to  or  buy  from  outsiders  at  $60  per  bale  represent 


252  The  Annals  of  the  American  Academy 

a  value  of  $2,100,000,000.  Figures  secured  by  the  writer  indicate 
that  on  settlement  an  average  of  about  $2.50  per  bale,  or  one-half 
cent  per  pound,  passes  from  the  unsuccessful  bettor  to  the  success- 
ful bettor.  On  35,000,000  bales  the  margins  thus  placed  at  risk 
would  amount  to  $87,500,000.  Only  estimates  can  be  secured  as 
to  the  proportions  of  the  bets  on  futures  on  these  commodities  which 
are  won  by  the  members  and  by  outsiders.  Since  estimates  have 
run  all  the  way  from  60  per  cent  up  to  85  and  even  90  per  cent,  a 
very  conservative  estimate  would  seem  to  be  65  per  cent.  If  the 
experienced  members  secure  65  per  cent  of  the  $87,500,000,  risked 
in  the  bets,  or  $56,875,000,  they  receive  back  $13,125,000  more  than 
half  of  the  $87,500,000,  or  of  the  $43,750,000  which  they  risked; 
and  the  outsiders  lost  this  amount.  Thus,  at  least  for  the  purpose 
of  illustration,  it  seems  fair  to  roughly  estimate  that  the  outsiders 
pay  to  the  members  in  fees  $7,875,000,  and  in  winnings  $13,125,000, 
or  a  total  of  $21,000,000. 

Then  the  people  at  large  are  concerned  also  with  the  transactions 
among  non-members.  A  goodly  proportion  of  these  trades  are 
between  spectilators  who  are  not  members  of  the  exchange  and  out- 
siders who  bet  in  a  small  way.  Some  of  these  speculators  operate 
in  such  an  illegitimate  manner  that  they  could  not  secure  election 
to  membership,  others  are  barred  by  the  low  limit  to  the  number 
of  members.  Many  of  these  speculators  are  far  removed  from  the 
seats  of  the  exchanges  and  are  often  organized  for  business  in  the 
form  of  what  are  commonly  called  bucket  shops.  This  class  of  deal- 
ing is  worst  of  all  because  so  little  under  law  or  restraint.  Estimates 
are  well  nigh  useless  here,  because  so  little  is  known  "outside  the 
trade"  on  which  to  base  estimates. 

But,  taking  the  estimate  of  $21,000,000  above,  for  which  the 
writer  believes  there  is  a  fair  basis,  and  to  be  more  than  conservative, 
assume  that  the  smaller  people  lose  another  $9,000,000  through 
dealing  with  speculators  with  business  connections  with  the  exchanges, 
or  who  assume  to  have  such  connection,  and  we  have  a  total  of 
$30,000,000  lost,  for  the  most  part  by  the  middle  and  poorer  classes 
of  people,  on  cotton  dealing.  Of  the  12,000,000  bales  of  cotton 
produced  in  this  country,  we  manufacture  more  than  4,000,000 
bales,  worth  say  $240,000,000.  In  case  of  not  more  than  $100,000,- 
000  of  this  we  may  estimate  that  there  may  be  hedging.  The  wrong 
transference  of  $30,000,000  in  order  that  a  group  of  manufacturers 


Functions  and  Needs  of  Our  Great  Markets         253 

may  have  the  privilege  of  hedging,  with  their  fellows  doing  nearly 
or  quite  as  well  without,  is  very  costly. 

There  is  evidence  that  the  reaUy  large  speculative  dealing  is 
in  wheat  on  the  Chicago  market.  Estimates  made  some  years  ago 
indicate  that  90,000,000,000  bushels  of  grain  sales  were  made  annually 
in  Chicago.  Applying  the  same  method  of  calculation  to  this  as 
that  used  for  cotton,  and  the  figures  lost  by  the  small  speculators 
on  all  commodities  run  into  a  few  hundred  million.  Viewed  as  a 
matter  of  wealth  distribution,  produce  and  stock  exchanges  evidently 
change  vast  sums  from  the  middle  classes  to  certain  rich  speculators. 
They  cause  distrust  and  sometimes  lead  to  industrial  panics;  but 
their  worst  feature  is  their  inculcation  of  a  lack  of  steady  business 
honesty  among  people  who  yield  to  temptation  to  get  something  for 
nothing. 

There  is  a  growing  demand  that  the  methods  of  our  markets 
which  deal  in  futures  and  options  should  be  investigated  with  that 
thoroughness  which  will  provide  a  basis  for  corrective  action.  Of 
the  fact  that  restrictive  laws  have  the  effect  of  stopping  the  excesses 
in  sales  of  futures  there  is  abundant  evidence  in  results  from  the 
legislation  of  various  south  Atlantic  states.  Federal  laws  making 
illegal  the  dealing  in  options  and  futures  have  been  proposed  which 
have  resulted  in  a  beginning  of  a  study  of  the  intricacies  of  the  prob- 
lem. Those  directly  interested  in  dealing  in  options  and  futiu-es 
have  abundantly  demonstrated  that  they  have  the  advantage  of 
having  technical  knowledge  of  the  subject  and  of  being  able  easily 
to  center  their  argtiments.  Those  not  interested  specifically,  but 
concerned  on  principle,  have  not  been  so  organized  as  to  represent 
the  public  interest  before  legislative  bodies  either  with  an  adequate 
grasp  of  the  subject  or  with  an  aroused  public  will.  Men  who 
have  proposed  regulation  cannot  claim  to  have  presented 
their  side  of  the  case  as  ably  as  the  opposition  to  regulation 
has  stated  theirs.  No  doubt  some  of  our  universities  have  econ- 
omists with  abilities  suited  to  attacking  this  problem.  Some  of 
the  professors  of  commercial  geography  have  collected  many  data 
as  to  the  flow  of  commodities  along  the  great  highways  of  commerce 
which  connect  international  markets,  which  would  be  useful  to 
students  of  this  subject.  Minds  able  to  investigate  deeply,  to 
master  details,  to  appreciate  great  economic  and  moral  interests,  to 
give  practical  generalization  and  to   coordinate  constructively  the 


254  The  Annals  of  the  American  Academy 

functions  of  public  crop-reporting  agencies  and  price-making 
markets  are  needed  to  evolve  a  general  informational  and  market- 
ing scheme  for  farm  products. 

If  markets  which  provide  for  dealing  in  options  and  futures 
could  confine  these  formsof  trading  to  narrow  limits,  the  manufacturer 
could  hedge  against  his  purchases,  allowing  some  one  else  to  carry- 
part  of  this  speculative  risk;  and  others  could  take  advantage  of 
this  amount  of  trading  in  futures  and  options  as  a  sort  of  clearing 
house  to  facilitate  trade.  Simply  to  illustrate,  if  a  law  could  be  so 
framed  as  to  confine  speculative  trading  in  a  given  market  to  quad- 
ruple the  actual  transference  of  product  in  that  market,  it  might 
conserve  a  useful  function  by  eliminating  the  great  evil  of  unrestricted 
speculative  movements  and  thus  avoid  the  state  of  uncertainty 
which  results  from  not  knomng  when  speculative  excesses  will  occur. 
If  all  deals  in  options  and  futiu"es  were  required  to  be  made  public 
in  order  to  be  legal,  this  for  all  practical  purposes  might  restrict 
speculative  sales  without  abolishing  these  features  which  are  useful 
in  actual  business. 

It  may  be  that  the  market  organization,  possibly  under  a  state 
or  national  law,  could  place  a  prohibitive  tax  on  all  sales  of  options 
and  futures  beyond  a  limit  which  would  be  sufficient  to  permit  all 
needed  speculative  sales,  but  would  prevent  gambling  excesses. 
This  would  enable  one  set  of  men  trained  in  financing  the  carrying 
of  raw  products  to  take  care  of  much  of  the  risk,  thus  relieving  the 
manufacturer  who,  by  hedging,  could  make  his  business  less  specula- 
tive. Possibly  laws  would  be  effective  which  would  define  the  amount 
of  trade  in  futures  and  options  which  would  be  considered  specula- 
tion and  the  additional  amoimt  which  would  be  considered  gambling, 
with  penalties  on  any  market  organization  for  allowing  its  mem- 
bers to  exceed  the  legal  limit.  If  the  excess  of  sales  of  options  and 
futures  above  a  given  number  on  a  given  market  were  declared  by 
law  to  be  gambling,  market  organizations  permitting  more  than 
the  limited  amount  of  sales  could  be  denied  the  use  of  the  mails, 
telegraph,  telephone,  express  companies  and  other  common  carriers. 
These  specific  suggestions  are  not  given  here  so  much  with  a  view 
to  offering  a  solution  of  this  knotty  problem  as  to  illustrate  the 
proposal  that  this  subject  is  open  to  possible  and  practical  sugges- 
tion, and  that  there  is  reason  for  the  hope  that  some  solution  for  the 
problem  of  our  market  excesses  may  be  found. 


Functions  and  Needs  of  Our  Great  Markets         255 

That  public  crop-reporting  agencies  shotild  be  greatly  amplified, 
especially  in  their  world  area  aspects,  so  as  more  adequately  to  per- 
form some  of  the  functions  now  performed  by  the  large  markets 
seems  clear.  Publicity,  at  more  frequent  intervals,  of  acreages, 
conditions,  yields,  stocks  in  store  and  prospective  demand  might 
prove  the  safest  and  most  efficient  cure  for  fluctuations  which  come 
from  speculation  based  on  private  crop  reports. 

Public  establishments  for  providing  statistics  useful  to  trade 
are  gradually  coming  into  existence.  In  the  United  States  basic 
work  is  done  every  fifth  year  by  the  United  States  Census  Office, 
when  the  acreage,  the  total  amount  of  farm  crop  products  grown 
and  the  numbers  of  live  stock  are  secured  by  an  actual  census  count. 
Thus,  in  1910,  when  census  taking  was  under  way,  every  farm  in 
the  entire  country  was  visited,  and  acreages,  quantities  and  other 
facts  were  secured  concerning  each  farm  crop  of  the  previous  year, 
1909,   and  the  number  of  each  class  of  live  stock  was  ascertained. 

The  Bureau  of  Statistics  of  the  United  States  Department  of 
Agriculture,  during  each  succeeding  year  of  the  next  five  years,  uses 
the  census  figures  as  a  basis  upon  which  to  estimate  changes  in 
acreages  and  in  numbers  of  live  stock.  These  acreages,  as  ascer- 
tained by  the  census  and  the  Bureau  of  Statistics,  are  used  as  bases 
upon  which  to  estimate  the  conditions  of  the  respective  crops  through- 
out the  season,  also  the  yield  per  acre,  and  to  determine  approx- 
imately the  production  per  state  and  for  the  entire  country.  Thus, 
throughout  the  year  the  markets  are  kept  informed  as  to  acreage, 
progressive  conditions  of  growth  and  quantities  harvested.  It  must 
be  admitted  that  the  public  generally  makes  little  direct  use  of  these 
reports,  but  relies  almost  wholly  upon  the  interpretations  of  them 
put  out  by  the  great  market  centers  in  the  form  of  current  price 
figures. 

The  method  of  securing  the  information,  of  reducing  it  to  fig- 
ures representing  averages  and  totals  and  of  publishing  the  figures 
may  be  of  interest.  The  Bureau  of  Statistics  of  the  United  States 
Department  of  Agriculture  is  the  largest  and  most  highly-organized 
department  devoted  to  reports  of  current  crop  conditions  supported 
by  any  coimtry  in  the  world.  With  a  current  expense  fimd  of  approx- 
imately $150,000  annually  for  that  purpose,  it  employs  about  fifty 
statisticians  and  clerks  in  the  City  of  Washington  and  a  third  as 
many    special  traveling  reporting  agents  outside  of  Washington. 


256  The  Annals  of  the  American  Academy 

A  state  agent  in  each  state  is  also  paid  for  part  of  his  time;  while 
nearly  three  thousand  county  correspondents  and  thirty  thousand 
township  and  individual  correspondents  give  voluntary  service  as 
crop  reporters.  There  are  thus  received  in  the  Washington  office 
fotir  classes  of  reports  on  each  crop.  The  reports  by  states,  from 
special  traveling  agents,  each  of  whom  has  from  one  to  four  states, 
and  those  from  the  state  agents  are  sent  directly  to  the  Secretary 
of  Agriculture  and  are  deposited  in  a  safe  until  the  crop-reporting 
board  meets  on  crop-reporting  day.  The  reports  from  the  coimty 
correspondents  and  also  those  from  the  township  correspondents 
are  sent  to  the  clerical  force  at  Washington,  where  they  are  assembled 
and  averaged  by  states  and  the  simimarized  results,  in  fractional 
parts,  are  also  placed  in  the  Secretary's  safe  till  the  crop-reporting 
board  is  in  session  and  ready  to  use  them. 

On  report  day  the  crop-reporting  board,  consisting  of  the  statis- 
tician and  four  assistant  statisticians  and  agents,  receives  the  four 
classes  of  reports  in  a  meeting  behind  closed  doors.  With  the  aid 
of  clerks,  the  estimates  from  the  different  classes  of  correspondents 
are  entered  on  sheets  in  four  colimms.  Each  boardmember  is  supplied 
with  a  copy  and,  working  independently  at  a  separate  table,  he  re- 
solves the  four  figures  for  the  given  crop  for  each  state  into  a  common 
figure  and  thus  constructs  a  fifth  column.  The  five  columns  of 
figures,  one  representing  averages  from  each  of  the  several  members, 
are  then  all  copied  side  by  side  on  a  single  sheet  and  the  board  in 
session  merges  the  judgment  of  its  five  members  into  single  figures 
for  each  state.  This  is  something  more  than  averaging,  because 
the  board  often  has  reasons  for  giving  more  weight  to  the  judgment 
of  one  class  of  reporters  than  to  that  of  the  others;  and  there  are 
at  times  other  legitimate  sources  of  information  than  that  which 
comes  from  the  four  classes  of  reporting  agencies. 

When  the  hour  set  for  announcing  the  figures  arrives  the  board 
has  its  report  worked  out  with  national  as  well  as  state  averages 
and  totals,  and  manifold  copies  are  made  of  a  table  of  these  figures 
together  with  a  few  brief  paragraphs  stating  the  leading  facts  as  to 
the  acreage  and  condition  of  each  crop.  A  few  minutes  before  the 
clock  strikes  the  hour  the  board  and  the  Secretary  of  Agriculture 
sign  the  report  and  take  it  to  the  corridor  near  the  telegraph  room. 
Several  copies  of  the  report  sheets  are  laid,  face  down,  on  a  table. 
Eight  or  ten  telegraph  operators  and  news  reporters  are  ready  for 


Functions  and  Needs  of  Our  Great  Markets         257 

the  stroke  of  the  clock,  and  with  the  word  they  seize  the  papers  and 
rush  to  the  telegraph  and  telephone  instruments.  In  a  single  minute 
the  wires  have  flashed  the  leading  figures  to  New  York,  Chicago, 
New  Orleans  and  other  great  markets. 

Now  contrast  this  procedure  with  what  takes  place  at  the  market 
end  of  the  wire.  There,  in  the  trading  pit,  hundreds  of  men  watch 
the  clock,  and  when  the  telegraphic  figures  giving  the  estimates  of 
the  acreage,  or  yield,  or  total  product,  of  a  given  crop  are  shouted 
out,  or  are  placed  on  the  blackboard,  each  dealer  forms  a  judgment 
as  to  whether  to  bid  higher  or  lower  on  the  products  affected  by  the 
reports.  The  conclusion  of  the  crop-reporting  board,  taken  in  the 
most  serene  calmness  of  a  quiet  room  in  a  building  surrounded  by 
a  beautiful  park  in  the  National  Capital,  suddenly,  on  the  wings  of 
lightning,  flashes  into  the  bedlam-like  mart  where  fortunes  are  made 
or  lost  in  a  moment.  The  selling  pit  has  a  spasm  and  in  a  few  mo- 
ments the  price  of  the  commodity  has  risen  or  fallen  to  a  fairly  stable 
equilibrium  at  a  point  warranted  by  the  newly-reported  facts  as  to 
crop  conditions. 

World  Acreages 

If  the  reports  thus  sent  to  the  great  market  included  the  entire 
world  acreage  the  effect  would  be  still  more  interesting.  At  present 
individuals  and  firms,  and  groups  of  operators  cooperating  privately, 
secure  reports  of  crops  from  other  countries  and  also  reports  of 
products  from  previous  crops  in  store  together  with  the  prospective 
demand.  There  is  thus  much  private  information  utilized  at  the 
great  market  centers  in  arriving  at  the  daily  price  current.  And 
too  often  the  speculating  public  is  led  to  believe,  or  allowed  to  believe, 
that  the  partial  facts  which  are  made  public  from  these  private 
sources  tell  the  whole  truth  when  they  may  not.  And  it  is  at  least 
widely  believed  that  those  dealers  who  have  the  more  complete  and 
accurate  information  sometimes  proceed  first  to  buy  many  margins 
in  option  and  future  deals  and  follow  this  movement  by  publishing 
their  privately  secured  facts  which  will  turn  the  margins  in  their 
favor. 

The  public  has  no  special  concern  as  to  which  of  two  groups 
of  trained  speculators  beats  the  other  by  securing  first  and  taking 
advantage  of  the  facts  of  changed  conditions.  The  public  is,  how- 
ever, deeply  concerned  with  the  practices  of  these  boards  when 
they  entice  men  of  small  means  who  are  without  knowledge  of  the 


258  The  Annals  of  the  American  Academy 

changed  conditions  of  crops  to  take  risks  in  a  neariy  "sure  thing" 
game  with  speculation  in  wheat  or  cotton,  just  as  it  was  concerned 
with  the  Louisiana  lottery.  The  public  is  also  concerned  to  avoid 
unnecessary  fluctuation  in  prices,  which  greatly  hampers  manu- 
facture and  often  seriously  affects  the  interests  of  producers  and 
consumers  and  also  of  dealers  in  actual  products.  There  exists  a 
strong  consensus  of  opinion  against  market  organizations  for  excessive 
dealing  in  options  and  futures,  and  if  a  plan  were  devised  which 
would  furnish  an  efficient  substitute  for  the  marketing  machinery 
which  has  there  grown  up  entwined  with  the  option  and  future 
features,  such  new  organization  would  be  generally  demanded. 
Were  a  really  efficient  scheme  devised  for  giving  great  fluidity  to 
the  markets  and  to  the  transfer  of  credits,  the  people  would  demand 
of  Congress  that  it  be  installed  by  a  restrictive  and  constructive 
federal  law.  There  are  many  intelligent  men  who  believe  that  if 
all  markets  for  dealing  in  options  and  futures  were  placed  under 
restrictions  so  stringent  as  to  prohibit  the  gambling  as  now  carried 
out,  business  would  adjust  itself  to  the  change  very  readUy. 

One  of  the  constructive  needs  is  world  area  statistics.  The 
new  International  Institute  of  Agriculture  at  Rome,  recently  organ- 
ized, has,  as  one  of  its  three  departments,  a  bureau  of  agricultural 
statistics,  which  collects  world  area  data  and  supplies  these  facts 
to  the  forty-nine  adhering  countries.  It  thus  gives  basic  statistics 
of  acreages,  conditions  and  total  products  as  assembled  at  Rome, 
Italy.  This  information  is  assembled  in  a  rather  open  way  and  is 
published  as  soon  as  it  is  tabulated  and  made  available.  At  present 
its  information  is  rather  old  when  received  by  the  markets,  but  it 
is  possible  that  eventually  not  only  monthly  reports  will  be  issued 
during  the  season  of  growth  of  a  given  crop,  but  that  throughout 
the  month  facts  of  special  changes  arising  from  storms,  droughts 
or  other  quickly  operating  causes  may  be  assembled  and  reported 
at  once  when  they  have  occurred.  That  Institute  collects  available 
facts  through  agencies  already  organized  in  the  different  countries; 
and  it  is  successfully  encouraging  the  equipment  of  statistical  crop- 
reporting  bureaus  in  all  countries. 

Two  methods  of  procedure  have  been  suggested  for  assem- 
bling and  giving  out  information  from  Rome.  Under  the  first  method 
no  especial  effort  will  be  made  at  keeping  the  facts  in  confidence 
while  assembling  them.   Each  country  will  compile  its  own  statistics, 


Functions  and     Needs  of  Our  Great  Markets        259 

publishing  them  when  it  pleases  and  sending  the  general  results  to 
Rome.  The  Institute  will  compile  these  facts  for  the  world  areas 
of  each  crop  and  publish  them.  Under  this  plan  it  will  be  able 
gradually  to  improve  the  statistical  organizations  throughout  the 
world.  Better  basic  census  statistics  of  actual  acreages  and  quan- 
tities grown  in  census  years,  preferably  once  in  five  years,  will 
be  made  by  the  adhering  nations,  and  more  accurate  compilations 
of  current  prices  will  be  made.  Annual  estimates  of  acreages  and 
seasonal  time  of  planting,  growth  and  conditions  for  harvesting  will 
be  based  on  better  and  more  numerous  data.  Markets  will  have 
better  annual  data  and  better  ten-year  averages  as  bases  for  com- 
parison to  determine  the  probable  prices  the  estimated  crops  of  a 
given  year  should  and  will  command  in  the  markets.  Gradually 
the  Institute  can  extend  its  records,  in  many  cases  based  on  actual 
census-like  counts,  to  amounts  of  each  product  consumed  in  the 
respective  countries,  the  amounts  in  transit  and  in  store,  and  may 
also  estimate  the  probable  demand  or  consimiption  in  each  country. 
Thus  the  figures  of  the  Institute  may  more  generally  supplant  the 
figures  of  non-public  agencies  and  thus  come  to  be  the  recognized 
bases  for  nearly  all  comparisons  and  estimates  of  acreages,  yields 
per  acre,  quantities  and  quality  of  products,  also  of  demand  and  of 
prospective  demand,  and  thus  serve  in  a  more  potent  way  in  provid- 
ing stability  of  average  daily  current  prices.  Even  under  this  plan 
there  will  be  some  holding  of  final  figures  in  confidence  until  they 
are  simultaneously  published  to  all  agencies  desiring  them. 

The  second  method  contemplates  the  assembling  of  data  in 
confidence,  not  with  great  secrecy,  but  without  allowing  publicity 
of  data  until  they  can  be  open  to  the  use  simultaneously  of  all  parties 
who  desire  them  as  is  now  done  by  the  United  States  Department 
of  Agriculture.  Under  this  plan  an  organization  somewhat  more 
formal  than  that  now  in  use  by  the  United  States  Department  of 
Agriculture  has  been  suggested.  Using  the  political  divisions  of 
this  country  to  serve  in  stating  the  scheme,  the  plan  suggested  is 
something  as  follows :  Have  in  each  township  a  man  who  will  spend 
a  day  once  a  month,  and  an  additional  day  on  occasion  of  special 
changes  of  crops  due  to  storm,  drought,  etc.,  in  gaining  knowledge 
of  acreages,  conditions  of  growth,  yield  and  quality  of  crops,  and 
number  of  live  stock  and  their  condition.  Have  him  report  in 
writing  to  a  district  agent  at  a  central  mailing  point  where  are  received 


260  The  Annals  of  the  American  Academy 

township  reports  from  a  few  score  of  townships.  Let  this  district 
agent  compile  the  reports  and  wire  totals  to  the  state  agent,  who 
would  compile  the  district  reports  into  state  averages  to  be  wired 
to  Washington.  The  national  crop-reporting  board  can  then  compile 
the  state  reports  into  national  averages  and  cable  the  totals  to  Rome. 

Possibly  machines  could  be  devised  for  use  by  the  district  and 
state  agents,  and  by  the  national  bureau  in  compiling  weighted 
averages.  If  the  closing  compilations  at  least  could  thus  be  done 
by  calculating  machines,  it  might  give  even  greater  assurance  both 
of  accuracy  and  that  all  the  figures  be  kept  in  confidence.  Or  expe- 
rience may  prove  that  the  present  crop-reporting  board  plan  is  not 
only  safe  but  better  adapted  to  giving  accuracy  to  the  estimates 
which  are  sent  by  a  nation  to  the  board  at  Rome.  At  least,  experi- 
ments should  be  undertaken  to  find  that  method  which  would  be 
both  efficient  in  getting  accurate  and  frequent  reports  and  econom- 
ical for  each  country. 

There  seems  to  be  no  difficulty  in  keeping  telegrams  in  confi- 
dence under  telegraphic  keys  such  as  the  one  devised  for  use  by  the 
United  States  Crop-Reporting  Board;  and  the  amount  of  telegraph- 
ing suggested  is  not  so  large  as  to  be  a  serious  item  of  expense.  The 
cost  of  the  time  of  the  local  estimating  agents  is  the  most  serious 
financial  matter.  The  lack  of  organization  in  some  countries  and 
the  difficulty  at  first  of  securing  dependablelocal  reporters  are  thought 
to  be  the  large  difficulties.  Traveling  agents  to  check  up  reports 
so  as  to  prevent  biased  statements,  and  to  educate  district  and 
state  agents,  as  proven  bythe  experience  of  the  United  States  Depart- 
ment of  Agriculture,  do  much  to  give  accuracy  to  the  primary  esti- 
mates. The  quinquennial  census,  compiled  for  township  units, 
checks  up  township  reporters,  serving  both  to  give  them  bases  for 
their  estimates  and  also  to  put  the  accuracy  of  their  work  to  the 
test,  that  they  may  feel  the  responsibility  of  giving  correct  state- 
ments of  actual  fact. 

With  really  comprehensive  and  efficient  crop  reports  of  the 
world  areas  of  a  given  crop,  the  great  markets  should  be  able  to 
maintain  fairly  steady  prices,  fluctuating  only  as  the  facts  of  pro- 
duction and  consumption  warrant.  Such  reports,  issued  by  an 
agency  which  all  parties  trust  as  to  its  fairness  and  efficiency,  would 
be  the  main  factors  in  determining  prices.  These  reports,  together 
with  a  simple  law,  probably  restricting  rather  than  abolishing  .the 


Functions  and  Needs  of  Our  Great  Markets         261 

amount  of  dealing  in  options  and  futures  to  adequately  meet  all 
requirements  of  hedging,  might  give  nearly  ideal  market  conditions. 
On  the  other  hand,  abolishing  deals  in  options  and  futures  might 
prove  the  better,  but  either  alternative  would  seem  preferable  to 
the  overwrought  system  in  which  gambling  is  mixed  with  business 
in  a  most  unbusinesslike  manner.  If  laws  prohibiting  dealing  in 
margins  are  not  practical  in  a  single  coimtry,  world  government 
in  market  matters  may  create  conditions  under  which  world  law 
along  this  line  may  be  effective.  Our  markets  are  world  wide  and 
our  statistical  service  is  rapidly  becoming  world  wide. 

A  weak  investigation  which  does  not  enter  into  the  problem 
in  the  most  virile  and  comprehensive  way,  by  failing  of  results,  might 
help  to  entrench  the  dominating  philosophy  of  the  nearly  unre- 
stricted gaming  pit.  Possibly  some  plan  of  a  national  or  inter- 
national commission  may  be  devised  which  will  spend  time  enough, 
energy  enough,  scientific  research  enough  and  business  sense  enough 
to  comprehend  the  essential  factors  and  to  advise  either  that  we 
continue  the  present  system;  that  some  modified  form  of  "future" 
price  making  be  adopted,  or  that  dealing  in  options  and  futures 
be  abolished.  In  any  event  the  next  step  needed  would  seem  to  be 
a  most  efficient  investigation. 

It  is  possible,  and  even  probable,  that  a  broader  public  scheme 
for  quickly  gathering  and  dispatching  crop  statistics  and  facts  con- 
cerning market  needs  would  serve  producers,  dealers  in  and  con- 
sumers of  fruits  and  vegetables  as  well  as  those  interested  in  the 
non-perishable  products.  In  case  of  these  latter  products,  no  very  com- 
prehensive system  of  statistics  has  been  devised;  but  even  here  the 
public  gathering  of  statistics  might  prove  to  be  very  useful  to  supple- 
ment the  very  awkward  and  inefficient  system  of  information  now 
served  by  private  agencies  to  the  growers  on  the  one  hand  and  to 
the  markets  on  the  other. 

Under  the  second  plan,  outlined  above,  of  assembling  crop 
reports,  the  township  agents  could  easily  include  reports  on  such  per- 
ishable crops  as  strawberries,  peaches  and  canteloupes.  The  tele- 
phone and  telegraph  could  be  used  to  assemble  at  once  the  estimates 
of  amounts  of  ripening  crops,  and  to  give  the  information  to  distant 
markets.  This  information  could  also  go  at  once  to  the  railways 
to  guide  them  in  supplying  a  sufficient  number  of  refrigerator  cars. 
Associations  of  producers  could  also  be  supplied  with  information 


262  The  Annals  of  the  American  Academy 

as  to  the  markets  most  needing  shipments,  as  gathered  by  paid 
agents  in  those  markets,  that  they  might  bill  their  car  lots  to  the 
most  favorable  markets  or  might  deflect  cars  already  part  way  on 
their  journey,  thus  avoiding  glutted  markets  and  supplying  all  con- 
sumers in  the  most  equitable  manner. 

Things  world  wide  in  their  needs  are  not  easily  organized  in  the 
public  interest.  World  peace  is  more  needed  on  accoimt  of  markets 
than  most  people  imagine.  World  government  has  already  been  inau- 
gurated. The  International  Institute  of  Agriculture  at  Rome  is 
the  first  beginnings  of  an  economic  department.  Even  if  its  pro- 
tocol or  constitution  need  to  be  enlarged  for  that  purpose,  would 
not  that  Institute  be  the  best  auspices  under  which  a  commission 
could  study  world  trade?  In  the  meantime,  would  not  national 
commissions  to  study  international  trade  practices  be  a  good  pre- 
liminary step  ? 


SPECIAL   VOLUMES 


The  United  States  as  a  World  Power 
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Political    and    Social    Progress    in    Latin- 
America 
The  Government  in  its  Relation  to  Industry 
American  Colonial  Policy  and  Administration 
Foreign  Policy  of  the  United  States — Political 
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Federal  Regulation  of  Corporations 
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Corporations  and  Public  Welfare 
TarifiF  Problems — American  and  British 
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Railway  and  Traffic  Problems 
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Race  Improvement  in  the  United  States 
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chises 
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The  Initiative,  Referendum  and  Recall 

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American  Business  Conditions 

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Bonds  as  Investment  Securities 

Stocks  and  the  Stock  Market 

American  Produce  Exchange  Markets 

Lessons  of  the  Financial  Crisis 

Banking  Problems 

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The  Improvement  of  Labor  Conditions  in  the 

United  States 
Labor  and  Wages 
The  Settlement  of  Labor  Disputes 
The  Outlook  for  Industrial  Peace 
Risks  in  Modem  Industry 
American  Waterways 
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